BT Financial Group. Strongly positioned for growth in Superannuation and Life Insurance. Brad Cooper Chief Executive. 11 July 2012

Transcription

1 BT Financial Group Strongly positioned for growth in Superannuation and Life Insurance Brad Cooper Chief Executive 11 July 2012

2 BT strongly positioned BT attaining sound returns and delivering on strategic initiatives Favourable long-term macro forces for the wealth sector remain, with regulation, customer preference and technology driving change BT is well positioned across the value chain and continues to invest in extending its capability, particularly for Prime of Life 1 and High Net Worth customers, Superannuation and Life Insurance Wealth a key investment priority of Westpac Group, helping to deepen customer relationships while providing low capital intensive growth 1 Prime of Life customers defined as between 45 and 65 years of age. 2

3 BT solid earnings growth driven by improving wealth penetration BT Cash earnings 1 ($m) Around 10% of Group earnings Solid 4 year earnings performance (2008 to 2011) despite ASX200 declining 39% over same period Wealth penetration of WBC Group customers up 230bps since FY08 FY09 FY10 FY11 1H12 1 Based on BTFG reported results for FY11 to be comparable with prior periods. From 1H12, BTFG results also include earnings from equities business. 2 FY08 includes St.George on a pro forma basis. 3 ASX200 price on 30 September 2011 compared to 30 September Refer to slide 21 for Wealth penetration metrics provider details. Period March 2008 to March

4 Delivering against 2010 key strategic targets 2010 Targets Progress 1. Alignment of banking and wealth distribution Wealth penetration (%) 2 Highest wealth penetration in sector with WRBB. St.George has the fastest growing wealth penetration WRBB St.George Peers 1, 2 & % 18.4% 15.5% 14.0% 13.6% Mar-10 Sep-10 Mar-11 Sep-11 Mar High net worth (HNW) customers High net worth customers Focus on deepening relationships across the sector Movement in HNW metrics 2010 to Total customer numbers Up 9% Wealth penetration 4 Up 26 percentage points to 50% Customers with 8+ products 4 Up 16% 3. Compelling customer experience Customer service and products being externally recognised Customer experience indicators Westpac Private Banking won five Australian Private Banking awards in 2012 Asgard Infinity awarded Best New Product from Investment Trends in 2011 BT Super for Life Fast Mover Award Targets detailed in BT market presentation June Refer to slide 21 for Wealth penetration metrics provider details. 3 Internally sourced. 4 Data for Westpac Private Bank. 4

5 Delivery against 2010 key strategic targets (cont.) 2010 Targets 2012 Progress 4. Target insurance segments Insurance growth ($m) Significant growth in General and Life Insurance from stronger sales and extending distribution Mar-10 Mar-12 CAGR 11% General Insurance Gross Written Premiums Mar-10 Mar-12 CAGR 12% Life In-force Premiums 5. Superannuation, accumulation and transition to retirement 6. Advice and platform service Net platform flows ($bn) 1 Capturing a high portion of market flows on Wrap, BT Super for Life & Corporate Super all platforms rank #1 in last 12 months Advisers Solid growth in adviser numbers and growth in interviews per planner per week (IPPPW) BT Average of two nearest competitors by FUA Jun-10 Dec-10 Jun-11 Dec-11 Movement in advice metrics Mar10 to Mar12 IPPPW 3 Up 29% No. of IFA 4 using BT platforms Up 10% No. of salaried planners Up 6% 1 Plan for Life, December 2011, All platforms net flows per half year for BT and average of largest two nearest competitors. 2 $2.9bn was from the transfer of Westpac staff superannuation plan. 3 IPPPW is interview per planner per week for Westpac Financial Planning. 4 IFA are independent financial advisers. 5

6 Regulation, customers and technology driving change Regulatory Change Changing Customer Demands Technology Superannuation guarantee step-up to 12% by 2019/20 will lead to increased competition and consolidation FOFA provisions for scaled and self service advice will drive growth of simple, affordable and scalable advice models Increasing compliance costs will require increased economies of scale Ageing population increasing focus on Superannuation and Life Insurance Current low risk appetite and changing demographics is seeing increased focus on different asset classes Customers want to be more in control of their activities, with strong growth in self managed superannuation Internet is accepted method for managing finances with nearly 70% of consumers going online for bank transfers and bill payments Detailed information and resources readily available online Online and self directed choices will continue to grow at a faster rate than the market 6

7 BT well positioned for change Australian macro wealth industry trends very positive Group has relationships with ~11m customers Wealth penetration less than 20% of customers 1 Growth Higher growth sector with access to customers Sector leading planner productivity Productivity 2 Scale Improved efficiency economies over next 5 years with Scale economies and lean process improvements Technology, including straight through processing Deeper customer relationships with improving wealth cross sell Return Re-orientating to larger/higher return profit pools Strength Across products, distribution and brands Re-orientating to larger and growing market profit pools Prime of Life, HNW 3, Superannuation, Life Insurance 21% market share in platforms overall 4 Preferred primary platforms in IFA space 5 Highly recognised brands 6 Well positioned for regulatory changes 1 Refer to slide 21 for Wealth penetration metrics provider details. 2 Comparator December HNW is High Net Worth. 4 Plan for Life, December 2011, All Master Funds Admin. 5 Investment Trends April 2012 Planner Technology Report. 6 BT brand tracking. 7

8 Growth - macro wealth industry trends are very positive Australia s superannuation growth expected to outpace growth in the real economy Australian wealth profit pool expected to increase 43% by , driven by an aging population, compulsory superannuation and Australians under-insured versus other developed countries Strongest growth in wealth profit pools expected to be in Superannuation (advice, administration and asset management) with 7.4% CAGR to 2017 Life Insurance with 7.3% CAGR to 2017 Expected growth in Australia s superannuation assets ($tn) 2 Expected Australian Wealth industry profit pools ($bn) 1 Personal/General Insurance Life Insurance Direct Equities Potential profit pools Life Ins. 7.3% CAGR % CAGR Estimated value of Australian superannuation assets ($tn) Managed Investments Superannuation Super. 7.4% CAGR 1 McKinsey & Co. 2 Internally sourced. 8

9 Productivity - driven by scale, technology and regulatory reform Estimated Australian Superannuation industry profit pool Total superannuation assets ($tn) Revenue ($bn) Assumed revenue margin (bps) Assumed expense to income ratio (%) Total industry profit pool ($bn) On conservative estimates, the Super industry profit pool is expected to grow by 55% between 2011 and 2017 This estimate is based on significant margin decline yet little change to the expense to income ratio Significant opportunity exists to enhance this profit pool through Scale from increased asset under administration Technology enhancements and straight through processing Regulation supporting electronic processing and simple investment solutions Industry consolidation as some smaller players exit the industry or join with more efficient players Segmentation of the Superannuation Market (%) 1 11 out of 68 players have 75% of the market 32 7 out of 29 players have 61% of the market Retail Sector Funds Industry Sector Funds Public Sector Funds SMSF Corporate Sector Funds 4 out of 30 players have 70% of the market (including BTFG) 9 out of 54 players have 70% of the market 1 Plan for Life, December

10 Return - re-orientating focus to higher profit pools Affluent (45+ years) and SME are the highest profit pools for our targeted areas of Superannuation, Life Insurance and Deposits Prime of Life customers (45-65yrs) account for 80% of wealth inflows Australian financial service profit pools by segment & product 1 ($) Increased focus on sources of highest growth and value - Deposit, Superannuation and Life Insurance Lending General Insurance Life Insurance Superannuation and Investment Deposits Significant opportunity given wealth 54% of total market footings for customers years, yet only 5% of total WBC Group footings Mass (all ages) Affluent Affluent < 45 years > 45 years SME 1 Lending = housing, business and personal loans along with credit cards; General insurance = home and contents and Personal insurance; Life Insurance = Retail Life Insurance and excludes Group Life Insurance. Superannuation and Investment = Retail Superannuation and self managed superannuation funds (excludes corporate and industry superannuation) and investments is retail investments. 10

11 Superannuation remains a priority Mass Market Advised Market Self Managed Superannuation Funds (SMSF) BT Super for Life Corporate Superannuation 1,030 Planners Strong platforms Growing Corporate Over 10,000 IFA 2 Superannuation platform $5bn FUM 1 $90bn in FUA $14bn in FUA 4 $10bn in FUA 5 Continue to grow BT Super for Life penetration Focus on increasing account balances Continue to expand direct and aligned planner network Maintain platform leadership Launching BT Select 3 Established banking accounts designed for SMSF Investing in administration capability to support SMSF Extended BT Super for Life to Corporate Superannuation market Continue to leverage Lead Institutional Bank position 1 Includes Westpac Staff Super of $2.9bn transferred March IFA is Independent Financial Advisers. 3 Refer slide 16 for further details. 4 There is some overlap between the SMSF and Mass Market. 5 Excludes $2.9bn of BT Super for Life that was transferred from Westpac Staff Super in March

12 Life Insurance a significant opportunity Australians significantly underinsured Reform amendments support growth Insurance within superannuation is an attractive proposition BT well positioned with broad distribution Retail adviser Life Insurance sales $39m in 1H12 (up 105% on 1H11) Strong upside potential given BT only have a 7% share of in-force premium market BT s Feb 2011 successful launch into the IFA 1 market took 19% of industry growth in new customers in Life insurance sales by retail advisers ($m) IFA 1 Bank Aligned Planners H09 2H09 1H10 2H10 1H11 2H11 1H12 In-force premium share of market 3 (%) WBC AMP ANZ Colonial First State NAB Suncorp TAL Other 1 IFA is Independent Financial Advisers. 2 Plan for Life data at December Plan for Life, December

13 Five measures of success 1. Alignment of banking and wealth distribution 2. Deepening relationships with Prime of Life 1 and High Net Worth customers 3. Compelling customer experience 4. Market share of Superannuation and Life Insurance 5. Growing advice capability (scaled, salaried and aligned) 1 Prime of Life customers defined as between 45 and 65 years of age. 13

14 Summary Wealth will increasingly be a strong growth driver supported by changing demographics, regulation and customer preferences BT well positioned across the value chain to capitalise on change Prime of Life and High Net Worth customers, Superannuation and Life Insurance are key focus areas for investment 14

15 BT Financial Group Appendix

16 BT Select - accelerating growth via planner footprint Attractive multi-brand advice offering Aligned dealer groups saw net growth of 34 practices in last 12 months to March 2012, 26 with Securitor and 8 with BT Select (previously Magnitude) Bank financial planning saw net growth of 33 planners in last 12 months to March 2012 offers flexibility and choice BT Select is the new dealer group brand launched 11 July 2012 Focus is on recruiting Independent Financial Adviser practices and Authorised Representatives Offers advisers access to a broad range of resources giving them both flexibility and choice Practice Management & Operations 16

17 BT Financial Group at a glance Advice & Distribution Platforms & Administration Product Management Asset Management Customer OWNED OWNED OWNED OWNED Diversified business % of total BTFG 1H12 revenue ALIGNED 32 Super & Investment EXTERNAL Private Bank / Advice / Equities Asset Management EXTERNAL (~100 dealer groups) EXTERNAL Insurance Capital & Other Note: Aligned Advisers includes 550 Securitor & BT Select advisers for which we hold the license, and 450 Licensee Select advisers who operate under their own licenses. BTFG owns 64.5% of BT Investment Management (BTIM) which includes J O Hambro Capital Management. 17

18 Strong and improving wealth position Wealth penetration of banking customers 1 (%) Home and Contents cross sell 2 (%) High net worth customers ( 000) and those with 8+ products (%) WRBB St.George High net worth customers ('000) Customers with 8+ products (%) Sep10 Mar 11 Sep11 Mar12 Sep10 Mar 11 Sep 11 Mar 12 6 Sep-10 Mar-11 Sep-11 Mar Life Insurance customers ( 000) BT Super for Life customer growth & FUM Platform market share 3 (%) (000 s) St.George customers (LHS) WRBB customers (LHS) FUM (RHS) ($bn) Sep 10 Mar 11 Sep 11 Mar 12 0 Sep-10 Mar-11 Sep-11 Mar Jun 10 Dec 10 Jun 11 Dec 11 1 Refer to slide 21 for Wealth penetration metrics provider details. 2 Home and Contents cross sell rates are defined as the number of risk sales divided by the total home loan sales. 3 Plan for Life to December

19 1H12 solid underlying business momentum offset by irregular items and market movements 1H11 Funds Management Insurance Capital 2H11 Funds Management Insurance Capital 1H12 Cash earnings movement half on half ($m) Movement 1H12 2H11 49 (20) 342 (8) 363 (49) (41) Cash earnings 19% Cash earnings down $69m (19%) to $294m Cash earnings impacted by irregular items and markets impacts amounting to $67m FUA and FUM Up 6% FUM / FUA (excluding J O Hambro) $bn Average % mov't 1H12-2H11 Down 19% $bn Period End % mov't 1H12-2H11 BT Wrap/Asgard FUA 67.5 (3) Corporate Super FUA Total FUA Retail FUM 15.1 (6) Institutional FUM 12.7 (8) Wholesale FUM 13.8 (6) Total FUM 41.6 (7) Funds management Cash earnings Insurance Cash earnings Capital and Other 21% 33% Large Cash earnings down 21% to $180m Average FUM up 17% (down 7% excluding J O Hambro acquisition) with solid net flows offset by avg. ASX200 down 6% Average FUA flat with wrap platform flow and transfer of Westpac Staff Superannuation balances to Corporate Super, offset by avg. ASX200 down 6% BT/Asgard platforms (including corporate super) increased market share by 1% to 21% 2 Cash earnings down 33% to $83m (up 11% on 1H11) 7% growth in Life in-force premiums offset by higher claims 13% growth in General Insurance gross written premiums offset by seasonally higher claims in first half LMI revenue down from de-risking of the book and lower credit growth Contribution was higher from a rise in earnings on invested capital up $11m and a reduction in expenses 1 Growth in Corporate Super due to transfer of Westpac Staff Super balances. 2 Plan for Life, December 2011, All Master Funds Admin. 19

20 Solid underlying performance, Cash earnings lower Key features of 1H12 underlying performance Platforms saw increased market share in BT Wrap / Asgard Platforms (including corporate superannuation) up 1% to 21% and #1 in net flows at 60% share of annual new business 1 Cross sell continued improvement in wealth penetration 2 to 17.7% (WRBB sector leading at 20.3% and St.George the fastest growing up 140bps to 14.0%) Advice continued investment through 549 advisers (up 8%), focused on wealth and aligning the network to maximise affluent and high net worth opportunities Sector leading revenue per adviser 3 (WRBB Financial Planner); St.George Financial Planner in line with Bank sector median Deposits had strong growth, particularly on platforms, of $1.1b (6%) 4 to $19.5b (up 20% on 1H11) Insurance premium growth above system 5. Strong sales of Life Insurance through the IFA network (up 33%) and cross sell of home and contents insurance. General insurance gross written premiums up 13% and Life Insurance in-force premiums up 7% Strategy Participate across the full wealth value chain to earn all our Australian customers superannuation, advice and insurance business The opportunity is significant, with Wealth penetration across the Westpac Group at only 17.7% (20.3% of WRBB and 14.0% of SGB) 2 Be the platform and services provider of choice for Independent and salaried Financial Advisers Grow owned and aligned financial planning networks Grow a diversified asset management portfolio to achieve sustainable above market performance Build on momentum in insurance sales from strengthened distribution and increased product knowledge across banking channels Key metrics 1H11 2H11 1H12 Employees (# FTE) 3,632 3,709 3,693 Change on 2H11 Women in senior leadership (%) x Revenue per adviser ($000 s) x Customers with a Wealth product (#m) Customers with an Insurance product (#m) Wealth penetration Group customers 2 (%) BT Super for Life customers ( 000) BT Super for Life FUM ($bn) H&C Insurance (WRBB) cross sell (%) H&C Insurance (SGB) cross sell (%) Deposits on Wrap 6 ($bn) Plan for Life, December 2011, All Master Funds Admin. 2 Refer to slide 21 for Wealth penetration metrics provider details. 3 Comparator December Includes Private Wealth and term deposits on Wrap. 5 Plan for Life December Includes cash accounts. 20

21 Definitions: Wealth Penetration metrics. Data based on Roy Morgan Research, Respondents aged 14+. Wealth penetration is defined as the number of Australians who have Managed Investments, Superannuation or Insurance with each group and who also have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group as a proportion of the total number of Australians who have a Deposit or Transaction Account, Mortgage, Personal Lending or Major Card with that group. 12 month rolling average to March WRBB includes Bank of Melbourne (until Jul-11), BT, Challenge Bank, RAMS (until December 2011), Rothschild, and Westpac. St.George includes Advance Bank, Asgard, BankSA, Bank of Melbourne (from Aug-11), Barclays, Dragondirect, Sealcorp, St.George and RAMS (from January 2012). Westpac Group includes Bank of Melbourne, BT, Challenge Bank, RAMS, Rothschild, Westpac, Advance Bank, Asgard, BankSA, Barclays, Dragondirect, Sealcorp and St.George. Disclaimer: The material contained in this presentation is intended to be general background information on Westpac Banking Corporation (Westpac) and its Australian wealth division, BT Financial Group. The information is supplied in summary form and is therefore not necessarily complete. It is not intended that it be relied upon as advice to investors or potential investors, who should consider seeking independent professional advice depending upon their specific investment objectives, financial situation or particular needs. The material contained in this presentation may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. All amounts are in Australian dollars unless otherwise indicated. Unless otherwise noted, financial information in this presentation is presented on a Cash earnings basis. Refer to Westpac First Half 2012 Results (incorporating the requirements of Appendix 4D) for the half year ended 31 March 2012 available at for details of the basis of preparation of Cash earnings. This presentation contains statements that constitute forward-looking statements including within the meaning of Section 21E of the US Securities Exchange Act of The forward-looking statements include statements regarding our intent, belief or current expectations with respect to our business and operations, market conditions, results of operations and financial condition, including, without limitation, future loan loss provisions, financial support to certain borrowers, indicative drivers, forecasted economic indicators and performance metric outcomes. We use words such as will, may, expect, indicative, intend, seek, would, should, could, continue, plan, probability, risk, forecast, likely, estimate, anticipate, believe, or similar words to identify forward-looking statements. These statements reflect our current views with respect to future events and are subject to change, certain risks, uncertainties and assumptions which are, in many instances, beyond our control and have been made based upon management s expectations and beliefs concerning future developments and their potential effect upon us. Should one or more of the risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from the expectations described in this presentation. Factors that may impact on the forward-looking statements made include those described in the section entitled Risk factors in Westpac s Interim Financial Report for the half year ended 31 March 2012 available at When relying on forward-looking statements to make decisions with respect to us, investors and others should carefully consider such factors and other uncertainties and events. We are under no obligation, and do not intend, to update any forward-looking statements contained in this presentation. For further information please contact Westpac Investor Relations. Andrew Bowden